HMV, the reinvigorated music store chain and owner of Waterstone's, today reported an 11.5 per cent rise in annual pre-tax profits following the collapse of some of its smaller rivals during the year.

The chain has gained share in the DVD, CD and home entertainment market after Woolworths went bust after nearly 100 years on the high street while Zavvi, the former Virgin Music stores that were bought out by management, went into administration. HMV acquired 25 Zavvi sites.

Pre-tax profits before exceptional costs rose from £56.6 million to £63 million in the 12 months to April 25, and total sales increased by 4.4 per cent to £1.9 billion. Shares in HMV rose by 1.89 per cent to 121p in early trading.

Like-for-like sales, which do not include revenue from stores opened during the financial year, rose by 1.9 per cent. However, comparable sales at Waterstone's continued to slide, falling by 3.8 per cent.

The bookseller is hoping to benefit from the release of a new Dan Brown novel later this year, and from a rush of celebrity autobiographies at Christmas, including books by actor Simon Pegg and comedian Jack Dee.

The company is beginning the final year of a three-year turnaround plan, executed under the leadership of chief executive, Simon Fox, who has been widely credited with reinvigorating the retailer.

Mr Fox said this morning that sales of Michael Jackson's music increased by an astonishing 80 times in the days after his death last week.

New initiatives to maintain sales despite long-term changes in the music and home entertainment markets include entering the live music industry through a joint venture with MAMA Group, which includes famous venues such as the Hammersmith Apollo, and a ticketing partnership with Seatem. Also, in April, HMV announced it would work with Orange to open mobile phone concessions in 15 of its stores from June.

If the partnership proves successful, it will be rolled out to 100 of HMV’s 255 stores by Christmas, potentially creating up to 300 jobs.

Mr Fox said that he was “very pleased” with the new ventures and was looking at more growth opportunities.

Its business has been refocused, with the percentage of sales coming from CDs down from 30 per cent to 28 per cent.

There were also recession-friendly measures such as Re/Play, a pre-played games offer where customers can upgrade their used computer games.

HMV’s final dividend was maintained at 7.4p for the year.

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